According to the results of the most recent survey, business activity in Maryland contracted in October. Survey respondents reported that the level of business activity dropped compared to the previous month. This represents the eleventh consecutive decline in activity and the largest decline to date. The drop was widespread across different company indicators including sales, number of employees, and customer traffic.
Looking ahead, respondents' expectations for economic activity six months from now declined sharply in October. Over the past two months there has been a significant negative shift in sentiment regarding future economic conditions for respondent's businesses and the state economy.
Respondents indicated that general business activity fell sharply in October with steep declines in most specific company indicators. The general business activity index at the company level fell to −53 from −31 in September. Respondents reported a sharp drop in sales as the sales index fell to −57 from −28. At the same time, customer traffic declined sharply with the index dropping to −59 from −34. The level of investment in new equipment and software declined considerably. Coincident with the weaker economic environment, respondents indicated that prices received fell in October for the second consecutive month, dropping to −26 from −9. An overwhelming majority of survey respondents also indicated that activity in the nation and the state also declined in October. The general business activity index for the nation and the state both fell sharply to −95 and −85, respectively.
According to the survey, the labor market weakened in October for the second consecutive month. Survey respondents indicated that employment and hours worked both fell sharply during the month. The number of employees index dropped to −23 from −15 in September. At the same time, the index of weekly hours fell sharply to −36 from −23. The October figures are the lowest to date and are a marked departure from earlier readings. Prior to September, these indexes remained near zero for most of 2008, averaging 1 through August. With the softer labor market, firms reported that increases in average wages remained moderate and that skilled workers were less difficult to find.
Turning to prices, the prices received by firms for their products declined for the second consecutive month with the October decline more widespread than in the previous month. At the same time, firms continued to report higher prices for both materials and energy. However, the number of firms reporting increasing prices dropped in October to the lowest level since early spring. From March to July, the prices paid for materials index averaged 58 while the prices paid for energy index averaged 82. In October, those indexes stood at 32 and 19, respectively. Expectations for prices to be paid six months from now also declined significantly.
Expectations of economic activity six months from now fell sharply in October. Survey respondents indicated that they anticipate lower growth for the nation, the state, and at their company. Expectations fell across the board from September, likely in response to ongoing turbulence in financial markets and its potential impact on economic growth. The view that activity will be lower at the respondent's company six months from now was more widespread. The expectations index for business activity at respondents' company fell to −22 from −7 last month. Notably, respondents indicated for the first time that they expect sales, employment, prices received, and customer traffic to be lower six months from now. At the same time, expectations for weekly hours, product inventories, and investment over the next six months remained negative.
R. Andrew Bauer